Facebook Inc. is an American social media giant that owns Facebook, Instagram, WhatsApp, Oculus and a range of other e-commerce businesses. Founded in 2004 in Harvard University dormitory by Mark Zuckerberg, Eduardo Saverin, Dustin Moskovitz, and Chris Hughes. and as of the first quarter of 2018, Facebook had 2.19 billion monthly active users. The company’s headquarters are in Menlo Park, California.
Facebook’s mission statement is “to give people the power to share and make the world more open and connected” (Annual Report, 2017) and the company generates revenues from selling advertising placements to marketers. Facebook business strategy is associated with an extensive and continuous focus on user experience, growth via acquisitions, new product development and continuously exploring the new ways of monetization.
The social media company employs more than 17000 people globally and in 2017 the company generated revenues of USD17.93 billion, which is an increase of 44% year-over-year and ad revenue was of USD17.08 billion, which is an increase of 49% compared to the previous year (Annual Report, 2017). Facebook has been successful in efficient capitalization on mobile advertising and its evolving role as a news source for increasing numbers of its users has positive implications on the long-term growth prospects of the business. At the same time, the social media company is not free of weaknesses and its major weaknesses include the dependence of revenues only on advertising, challenges in sustaining the growth rate of revenues and the dependence of the business on a few key personnel such as Mark Zuckerberg and Sheryl Sandberg.
a) Facebook’s Strengths (Internal Strategic Factors)
Facebook Inc.’s strengths support its market position as the biggest player in the social media market and as a major player in the online advertising market. The internal strategic factors that build business competitiveness are considered in this element of the SWOT Analysis. The following are Facebook’s main strengths:
Facebook’s social networking website’s popularity comes along with a strong brand image. The company has developed its business as a reliable social media service provider. In relation, Facebook Inc.’s large consumer base is a strength that brings along a number of beneficial externalities: The large number of users or members makes Facebook’s social networking website more attractive to potential new members, more attractive to advertisers, and more difficult for new social media companies to compete with. Moreover, with its high revenues, the company has the financial capacity for research and development (R&D) investments for new products, and investments in new business ventures. This element of the SWOT analysis shows that Facebook Inc. has the necessary strengths to maintain its competitive advantage and attractiveness in the online advertising market.
b) Facebook’s Weaknesses (Internal Strategic Factors)
Facebook suffers from a number of weaknesses based on the nature of its social media business. This element of the SWOT Analysis identifies the internal strategic factors that prevent or reduce the company’s success. In Facebook’s case, the following weaknesses are most significant:
Facebook’s social networking website and related services are easily imitable in terms of basic features and functions. For example, other companies can develop their social networking websites to directly compete against Facebook Inc. Also, while the company earns through online advertising, this earnings mechanism is also a weakness because users could perceive the advertisements as a nuisance in their social media experience. Facebook also suffers from a low level of business diversification, which maximizes market risk exposure. This is so because the vast majority of the company’s earnings are generated through its social networking website and related mobile apps. Based on this element of the SWOT analysis, Facebook Inc. must address its weaknesses to reduce market risk exposure, and to increase potential business growth.
c) Opportunities for Facebook Inc. (External Strategic Factors)
A number of opportunities are available for Facebook Inc. to grow its social media business internationally. This element of the SWOT Analysis enumerates the external strategic factors that the company can exploit to improve its business situation. The following opportunities are most relevant in Facebook’s case:
Facebook Inc. has the opportunity to diversify outside its core social media and advertising business. The company has already taken steps in this direction, such as its purchase of Oculus VR, which is a virtual reality technology business that can support the social networking services of the firm. However, further diversification can boost Facebook’s business risk reduction. Another opportunity is for the organization to innovate more products that are complementary to its social networking website and mobile apps. Market penetration and development can increase membership and revenues, in line with Facebook’s generic and intensive growth strategies. This element of the SWOT analysis indicates the need for Facebook Inc. to reform some of its strategies to ensure continuous growth.
d) Threats Facing Facebook Inc. (External Strategic Factors)
Facebook Inc. experiences the potential risks and negative effects of threats in its business environment. External strategic factors that prevent or impede business growth are outlined in this element of the SWOT Analysis. Facebook must address the following threats against its social media and online advertising business:
Imitation is one of the major threats in the business, considering that other firms could develop social networking websites and mobile apps similar to that of Facebook. Also, with increasing membership, Facebook Inc. now experiences high risks of cybercrime, which threatens to reduce the attractiveness of the company’s social media services. Moreover, as the organization becomes more popular, it increasingly contributes to market saturation that could lead to a future business growth plateau or stagnation. Based on this element of Facebook’s SWOT analysis, it is crucial for the company to develop new products and related technologies, and to enter new businesses.
Facebook Inc. benefits from its leading market position in the social media business. However, this SWOT Analysis points out a number of issues that the company must address to maintain its growth and profitability.
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